Comments from Renewable Energy Institute on the Government's Strategic Energy Plan Draft A Dangerous Path That Could Undermine Japan's Competitiveness Through Failed Decarbonization and Rising CostsA Call to Unlock the Full Potential of Energy Efficiency and Renewable Energy

20 December 2024

in Japanese

Key Point
  1. The government’s draft of the Strategic Energy Plan1 limits renewable energy electricity, the most effective means for decarbonization, to 40-50% by 2040. The European Union has already achieved this level today, meaning Japan’s plan lags 15 years behind. Notably, wind power is projected to account for only 4-8% of the energy mix, making it difficult to attract the global wind power industry to Japan. Measurements to improve energy efficiency are also insufficient, with a roughly 10% reduction in final energy consumption anticipated.
  2. To meet the government's proposed 73% reduction in greenhouse gas (GHG) emissions compared to 2013 by 2040, the draft plan relies on nuclear power for 20% of electricity and requires near-zero CO2 emissions from the remaining 30-40% of thermal power generation
  3. Even with the three nuclear reactors that have received approval and seven reactors under review for restart, it will not be enough to supply 20% of electricity. By 2040, four reactors will exceed 60-year operation time, and the construction of new reactors will not be feasible due to their long construction lead time, making it extremely difficult to achieve the 20% nuclear target.
  4. To achieve near-zero CO2 emissions from thermal power plants, a phase-out of coal plants is necessary even including those considered to be "highly efficient." However, the draft plan only mentions a "fade-out of inefficient coal-fired power" without addressing the remaining coal-fired power. Technologies such as hydrogen and ammonia combustion and CCS-equipped thermal power have not been realized yet making this assumption extremely difficult to achieve.
  5. According to the government's Working Group on Generation Cost Verification, the cost of decarbonized thermal power is immense: JPY 29.9/kWh for hydrogen combustion, JPY 23.1 for ammonia combustion, and JPY 27.6 for coal-fired power with CCS. If Japan depends on such high-cost generation for 30-40% of its electricity supply, electricity prices will rise sharply.
  6. The draft plan is likely to undermine Japan’s decarbonization efforts, as 20% nuclear and 30-40% decarbonized thermal power presents an unfeasible direction. Additionally, high energy costs will risk weakening Japan’s economic competitiveness.
  7. The scenario published by Renewable Energy Institute2 shows that Japan has sufficient potential to supply over 90% of its electricity from renewable energy by 2040 while ensuring stable supply and price stability. To reduce GHG emissions and enhance Japan's economic competitiveness, energy efficiency improvements and maximizing renewable energy should be the core strategy for decarbonization.

Full Text

On December 17, the Ministry of Economy, Trade, and Industry (METI) presented the draft of the 7th Strategic Energy Plan. On the previous day, the result of the cost estimation for power generation by source was also published. The draft plan is based on the government's Nationally Determined Contribution (NDC) target of a 73% GHG reduction by 2040 compared to 2013 levels, which corresponds to a 69% reduction compared to 2019 levels. While this is the median of the global reduction range required to achieve the 1.5°C target, Japan as a developed nation should strive for a higher target. However, the energy supply and demand outlook presented in the draft plan suggests that even this 73% reduction target may not be achievable.

Shying Away from the Full Potential of Energy Efficiency and Renewable Energy

The COP28 set the global goal of tripling renewable energy capacity and doubling energy efficiency improvements by 2030 since these two strategies are the most realistic and cost-effective means for decarbonization. The main issue of the draft plan is that these major measures are not central to the government’s plan. It projects a mere 10% reduction in final energy consumption by 2040 compared to 2023 levels. At the same time, it limits the share of renewable energy in the energy mix to 40-50%. As the draft itself acknowledges, EU supplied over half of its electricity generation by renewable energy in the first half of 2024. Japan plans to reach this level with a 15-year delay.

It is also particularly concerning that wind power will only account for 4-8% of total electricity generation, while it should be central to the electricity mix alongside solar power. Despite the government's promotion of offshore wind, including floating turbines, such a low target makes it difficult for Japan to attract global wind power investments.

Achieving 20% Electricity from Nuclear is Exceptionally Challenging

The draft plan sets a goal for nuclear power to supply 20% of electricity by 2040. However, even with the restart of reactors that have received approval (such as Kashiwazaki-Kariwa) and the seven reactors under review (e.g., Hamaoka, Tomari), it will still be insufficient to meet the target. By 2040, four of these reactors will exceed 60-year operation time, and the construction of new reactors is not feasible due to the estimated 20-year construction lead time as well as the fact that new reactor technologies are still under development. Hence, achieving the 20% target for nuclear power generation is highly unlikely.

A Continued Reliance on Fossil Fuels Including Coal

The draft plan continues to rely on thermal power generation for 30-40% of electricity in 2040. Thermal power will need to be almost completely decarbonized to meet the 73% GHG reduction target even with 20% nuclear power, as energy efficiency and renewable energy deployment are minimal. However, the draft plan is vague on the decarbonization of thermal power generation, only mentioning the "fade-out of inefficient coal" and not addressing all coal-fired power. The CO2 emission from so-called "high efficiency" coal power does not differ much from the inefficient ones, and it still has double the emission than natural gas power plants.

Coal-ammonia co-firing, promoted by the government and some utilities, reduces CO2 emissions by only 30%, even with a 50% green ammonia co-firing ratio. The technology for fully decarbonized ammonia co-firing has not been established, and CCS-equipped coal power generation, which involves the transportation and storage of CO2, has not yet been proven to achieve decarbonization. Hence, relying on such undeveloped and high-cost technologies for 30-40% of electricity generation is a significant risk to Japan’s decarbonization efforts.

Risk of High Energy Cost Undermines Japan's Economic Competitiveness

In addition to the risk of failing to meet decarbonization targets, the draft plan poses another significant risk: it could lead to skyrocketing energy costs, weakening Japan's economic competitiveness. According to the government’s cost verification, technologies for decarbonizing thermal power (i.e., hydrogen, ammonia, CCS) will be extremely costly. The estimated generation costs (LCOE) are JPY 29.9/kWh for hydrogen combustion, JPY 23.1 for ammonia combustion, and JPY 27.6 for coal power with CCS.

The International Energy Agency’s latest outlook indicates that the cost of renewable energy continues to decrease globally. By 2040, the cost of solar power will be 3.5 cents/kWh in the U.S. and Europe, 3 cents in China, and 2.5 cents in India. Onshore wind will range from 3.5 to 5.5 cents. If Japan continues to rely on high-cost decarbonized thermal power on a large scale, it will face a risk of losing economic competitiveness.

A Call for an Energy Strategy That Fulfil the Role of Developed Country in Decarbonization and Enhance Economic Competitiveness

METI has recognized that "the stable supply of decarbonized energy is crucial to national strength," and that recently Japan lost JPY 26 trillion to fossil fuel imports as opposed to the JPY 29 trillion earned from the exports of automobiles or semiconductor manufacturing equipment.

However, the government's draft plan remains focused on uncertain and costly technologies like nuclear power and decarbonized thermal power, failing to address the goals of a stable decarbonized energy supply and increasing energy self-sufficiency through renewable energy. To meet the expectations that the global community has on developed economies in leading decarbonization while enhancing the domestic economy to remain competitive, Japan’s energy strategy must be centred around energy efficiency improvements and maximizing renewable energy.

Renewable Energy Institute’s latest scenario demonstrates that Japan has sufficient potential to supply over 90% of its electricity from renewable energy by 2040. Even with large amounts of variable renewable energy, Japan can ensure a stable supply and maintain stable electricity prices.

We urge the government to adopt an energy strategy that prioritizes energy efficiency and the full maximization of renewable energy. This should be accompanied by targeted policies and institutional reforms to ensure a sustainable, competitive, and decarbonized future for Japan.

<Related Link>
[Special Contents] Key Issues to Address in Japan's Strategic Energy Plan

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